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https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 521 | BIS APPENDIX
- 522 - A later final paper on this topic has been published in July 2008. http://www.bis .org/publ/joint21.htm
Colored type is used nowhere else in the report. The report of 31/7/08 is not just a corrected version of
the 2005 report however, but an entirely different report, that takes account of t... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 522 | BIS APPENDIX
- 523 - any conclusion showing systemic risk. The effecti vity of their obstruction may be due to the
generally accepted fiction that a working group has only one opinion.86
4. No effort is made to sketch scenario’s following realization of risks, or to estimate the size of the
risks. The forum does... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 523 | BIS APPENDIX
- 524 - following realization of a given risk - are not investigated.
The next and last section of the summary has the title Recommendations . The recommendations are
quoted in full because they clearly outline the state of affairs and thinki ng in 2005, and show that the
supervisors assume that ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 524 | BIS APPENDIX
- 525 - legal authority to enter into the transaction.
Marketing: When marketing structured CRT products, originators and dealers should seek to
foster a complete understanding of the nature and material terms, conditions, and risk s involved
and should not encourage exclusive reliance on externa... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 525 | BIS APPENDIX
- 526 -
Note that both models and ratings are considered to be imperfect, and that blind faith is considered
a risk.
It is obvious that these recommendations include many valuable observations. Weak points seem to
be: the utopian character of many recommendations (given the occupation of the vari... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 526 | BIS APPENDIX
- 527 - insurance regulators from around the world, issued a comprehensive report on these products. The
report focused on whether banks and other firms involved in the CDO and credit default swap business
understood the credit risk they were taking. It advised them to make sure that they understood... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 527 | BIS APPENDIX
- 528 - 12. Apart from information about a few factual developments this report has no added value with
respect to the GAO -reports. It may even be considered a step backwards: the necessity of action
stressed by the GAO -reports is completely missing in this leisurely BIS -report.
13. The report i... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 528 | BIS APPENDIX
- 529 - Househ olds may not completely understand their mortgage contracts or how their payments
could change in response to interest rate shocks or other developments. In particular, the
introduction of negative amortization loans and a number of other new loan contract s has led
households to as... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 529 | BIS APPENDIX
- 530 - package and sell loans do not need to manage credit and interest rate risks, but are instead exposed to
liquidity, operational and reputational risks. Growing dependence on finan cial markets has also
increased the exposure to market turbulence. One aspect of this is that, in periods of sever... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 530 | BIS APPENDIX
- 531 - utterly unprofessional and irresponsible. One can even win a hundred million dollars by buying a
lottery ticket, and survive crossing a street with eyes and ears closed. But these are no more than good
luck.
June 2006. BIS AR 2006.
The BIS reporting year runs from 1 April until (and i... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 531 | BIS APPENDIX
- 532 - word “surprise” is used three times. The surprise is that the sun is still shining. But:
«A number of signs have emerged that some kind of turni ng point might have been reached. Long
bond rates have finally begun to rise, more sharply since the turn of the year, and evidence has been
acc... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 532 | BIS APPENDIX
- 533 - increasing complexity and opacity. Market liquidity in this environment has yet to be put to the test.
The fact that carry trade speculation seems to have intensified in recent years also implies the potential
for crowded trades that could, in the limit, lead to an interactive deterioration o... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 533 | BIS APPENDIX
- 534 - of the inflation target is both larger and more lasting. Alternatively, there co uld be scope for reducing
this trade -off dilemma by using other instruments, of a more regulatory nature, to help reduce the
build -up of credit -financed imbalances in the first place. Such suggestions would, h... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 534 | BIS APPENDIX
- 535 - Appendix C: Understanding the credit risk of ABS CDOs ................................ ......................... 46
Appendix D: Constant proportion debt obligations: A case study of model risk in ratings
Assignment ................................ ................................ ........... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 535 | BIS APPENDIX
- 536 - risks of these products and activities and to set appropriate risk limits. Supe rvisors also observed that
some firms’ internal risk reporting practices did not provide sufficient information regarding the
volume and nature of their CRT activities, hindering their ability to monitor the firms... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 536 | BIS APPENDIX
- 537 - depend on other market parties, and on the safety and soundness assurance of supervisors. If the
supervisors c annot see the concentrations, how can market parties be supposed to see them? And
finally: what if - due to their business model - a relatively large need of liquidity depends essent... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 537 | BIS APPENDIX
- 538 - 10. This is a shameless report. It greatly helps explain the occurrence of a crisis. With people like
those of BIS in responsible positions, catastrophe is unavoidable.
Chapter 1, Rescue, recovery, reform.
Chapter 1 gives a very interesting evaluation o f the subprime crisis. Interesti... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 538 | BIS APPENDIX
- 539 - sphere of influence, banks are required to hold capital in order to engage in risky activit ies. While it
may be hard to believe, the regulatory capital requirement did limit the build -up of leverage on bank
balance sheets. However, lower leverage meant lower profitability, so bank managers ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 539 | BIS APPENDIX
- 540 - P. 12/20 gives a few examples of insignificant actions by mostly i rrelevant supervisors.124
The section concludes as follows:
«In the industrial economies – especially the United States, where the problem was becoming the
most severe – there was little discussion of what types of tools pol... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 540 | BIS APPENDIX
- 541 - comprehensive set of rules to ensure that it functions smoothl y.»
The remark refers to the following footnote:
«As John McMillan notes, individual incentives and self -regulation go only so far. The existence of
an underground economy proves that markets can self -organise but only when tr... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 541 | CFTC APPENDIX
- 542 - 4. The CFTC annual reports 2006 and 2008.
Table of contents o f this appendix.
(Acting) chairpersons 1996 -2010.
CFTC AR 2006.
CFTC AR 2008.
The FCIC report on the history of the CFTC and the (de)regulation of OTC.
(Acting) chairpersons 1996 -2010.128
John E. Tul... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 542 | CFTC APPENDIX
- 543 - 4. There is no trace of awareness of, or interest in, the performanc e of the financial system as a
whole.
5. The annual report completely lacks any critical attitude. As implied by the above, it is extremely
self-centered.
6. There is no list of publications.
7. The CFTC may very well... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 543 | CFTC APPENDIX
- 544 - complexity is rapidly evolving with new technologies, globalization, product innovation, and greater
competit ion.
The Commission accomplishes its mission through three strategic goals, each focusing on a vital
area of regulatory responsibility. They are:
1. to ensure the economic vitali... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 544 | CFTC APPENDIX
- 545 - The section “Performance Highlights for Goal Three” on p. 24/28 includ es the following
subsection:
«Capital Computation and Risk Models.
The Commission adopted amendments to its regulations that recognize the growing use by FCMs
of internally developed mathematical models for value -... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 545 | CFTC APPENDIX
- 546 - crisis.137 Formulati ons about performance often are misleading, if not plainly incorrect.
One of the first pages of AR 2008 is called the “CFTC Awards Page”. It is devoted to two prizes
awarded for AR 2007.
Association of Government Accountants (AGA) Awards the
CERTIFICATE OF EXCEL... |
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- 547 - 4) requiring production of more detailed trading information from index traders and swa p
dealers; reviewing whether index traders and swap dealers are properly classified for
regulatory and reporting purposes; […] and
7) issuing an unprecedented special call for information from commodity... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 547 | CFTC APPENDIX
- 548 - that would cause loss of confidence or negatively affect price discovery or risk
shifting.
Outcome Objective 1.2: Markets are effectively and efficiently monitored to ensure
early warning of potential problems or issues that could adversely affect their economic
vitality.
Annual Per... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 548 | CFTC APPENDIX
- 549 - Note that the goal suggests that this is possible. That is, that law a nd regulation are adequate. After
2008, with events suggesting a terrible lack of protection of users and public, one would expect the
CFTC to explain the discrepancy between appearances (= reality) and the suggestion of ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 549 | CFTC APPENDIX
- 550 - 2. Number of rulemakings to ensure market integrity and financially sound markets.
3. Percentage of clearing organizations that comply with requirement to enforce their rules.
[Regarding objective 2:]
1. Percentage of intermediaries who meet risk -based cap ital requirements.
2. Perc... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 550 | CFTC APPENDIX
- 551 - Commodity Exchange Act’s requirement that trading occur on a regulated exchange might be applied
to the products they were buying and selling. In 1993, the CFTC sought to address these concerns by
exempting certain nonstandardized OTC derivatives from that requirement and from certain other ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 551 | CFTC APPENDIX
- 552 - Futures Industry Association conference in March 1999. “The fact that the OTC markets function
quite effectively without the benefits of [CFTC regulation] provides a strong argument for
development of a less burdensome regime for exchange -traded financial derivatives.”
The following year... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 552 | CVS MEMBERS FCIC
- 553 - 5. CVs of the members of the FCIC.
This appendix is included to present evidence about the competences of the members of the FCIC,
and bec ause the source, the FCIC website as of 20/2/12, includes the following acknow ledge ment of
Brooksley Borns efforts to improve regulation of OTC,... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 553 | CVS MEMBERS FCIC
- 554 - Summaries of the CVs.
Phil Angelides (chairman).
Nothing in the biography143 of Angelides shows scientific or research competence or experience. It
does show that he may hav e contributed to the preparation and size of the crisis. It does not show
opposition to AH or CRA policies,... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 554 | CVS MEMBERS FCIC
- 555 - Keith Hennessey.
«Before coming to Washington in 1994, he s pent two years developing software at Symantec Corporation
and two years at Harvard where he received a Master in Public Policy degree from the John F. Kennedy School
of Government. He earned a BAS degree in math and politica... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 555 | CVS MEMBERS FCIC
- 556 - «Bill has been recognized by the National Federation of Independent Business as a "Guardian of
Small Business" and has received the "Spirit of Enterprise" award from the U.S. Chamber of
Commerce. The League of Private Property Voters has honored him as a "Champion of Private
Proper ty."»... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 556 | CVS MEMBERS FCIC
- 557 - FCIC CVs of the members of the FCIC.
As presented by the FCIC website on 20/2/12.
Phil Angelides (Chairman).
Phil Angelides has ea rned national acclaim as an effective public and private sector leader with broad
expertise and accomplishments in the fields of investor protect... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 557 | CVS MEMBERS FCIC
- 558 - Mr. Angelides has been active in the civic life of his community, state, and nation for more than three
decades. He was the Democratic nominee for Governor of California in 2006. He curr ently serves as
the National Chairman of the Apollo Alliance, a coalition of business, labor, environm... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 558 | CVS MEMBERS FCIC
- 559 - Ms. Born is a 2009 recipient of the John F. Kennedy Library Foundation's Profile in Courage Award
"presented annually to public servants who have made courageous decisions of conscience without
regard for the personal or professional consequences." She received the award in recognition of... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 559 | CVS MEMBERS FCIC
- 560 - In 1994, he co -founded and served as President of American Partners Capital Group, which served
the needs of institutional investors and investment managers through capital formation programs in a
variety of alternative asset categories.
From 1983 -1994, h e was Managing Partner and ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 560 | CVS MEMBERS FCIC
- 561 - Senator Bob Graham (Commissioner).
Senator Bob Graham is the former two -term governor of Florida and served for 18 years in the
United States Senate. This is combined with 12 years in the Florida legislature for a total of 38 years
of public service. He was recognized by the peop... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 561 | CVS MEMBERS FCIC
- 562 - Keith Hennessey ( Commissioner).
(The website biography has no photograph of Hennessey).
Keith Hennessey most recen tly served as the senior White House economic advisor to President
George W. Bush. Mr. Hennessey coordinated economic policy for the President, including financial
mar... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 562 | CVS MEMBERS FCIC
- 563 - Douglas Holtz -Eakin (Commission er).
Douglas Holtz -Eakin has a distinguished record as an academic, policy adviser, and strategist.
Currently he is the President of American Action Forum.
Since 2001, he has served in a variety of important policy positions. During 2001 -2002, ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 563 | CVS MEMBERS FCIC
- 564 - Heather H. Murren, CFA (Commissioner).
Heather H. Murren, CFA, is the cofounder and served as the Chairman of the Board and Chief
Executive Officer of Nevada Cancer Institute (NVCI) from it's founding in 2002 until June 2009, and
remains a member of its board of directors. NVCI is... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 564 | CVS MEMBERS FCIC
- 565 -
Hon. Bill Thom as (Vice Chairman).
A member of the U.S. House of Representatives for 28 years, Bill Thomas has spent his career
strengthening health care legislation, reducing tax burdens, advocating free and open trade and
protecting workers' pensions.
Mr. Thomas c ontinues... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 565 | CVS MEMBERS FCIC
- 566 - John W. Thompson ( Commissioner).
John W. Thompson is chairman of the board of directors of Symantec Corporation. During his 10 -
year ten ure as chief executive officer, he helped transform Symantec into a leader in security, storage
and systems management solutions delivered to a... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 566 | CVS MEMBERS FCIC
- 567 - Peter J. Wallison ( Commissioner).
Peter Wallison holds the Arthur F. Burns Chair in Financial Policy Studies and is co -director of the
American Enterprise Institute (AEI)'s program on Financial Policy Studies. Prior to joining AEI, he
practiced banking, corporate and financial ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 567 | DNB APPENDIX
- 568 - 6. DNB - the Dutch central bank & financial supervisor (DNB) 1999 -2008.
Results of an analysis of Annual reports and Overviews financial s tability 2003 -2007.
Table of contents of this appendix.
Preliminary remarks.
Summary and conclusions.
The annual reports.
The Overvi... |
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- 569 - insufficient attention to the financial system as a whole. Regulators and supervisors thought that the
stability of the financial system would be ensured sufficiently by taking care of the stability of the
individual institutions.»
As the source a note mentions: DGAO, The system for supervi... |
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- 570 - 10. Even though DNB employees were involved in the writing of the CGFS report about Credit risk
transfer (CRT) of 2003 and the report of the Joint Forum on CRT of 2005, and these reports
mention several risks which require action of supervisors, the reports are ignored by the DNB AR
and sta... |
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- 571 - year or years. Of course this is a necessary condition for reliability.149
According to the annual reports 2006 and 2007, the average number of employees of DNB in these
years were 1630 and 1566 full time equivalent respectively.150 The costs of personnel in 2006 and
2007 were 146 and 169... |
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- 572 - objective of the Policy Group […] has been to promote enhanced strong practices in counterparty
credit and market risk management. [… The] report sets forth the Policy Group's review of key risk
management issues, its evaluation of emerging strong practices, and its recommendatio ns for acti... |
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- 573 - (4.4.1 Transparency 116/ 4.4.1.1 Transparency private sector 116/ 4.4.1.2 Public sector 117/ 4.4.2
Review of Capital agreement 118/ 4.4.3 Hedge Funds 118/ 4.4.4 Involvement of private sector
119/ 4.4.5 Standards for payment systems 121)
4.5 Other forms of international financial cooperatio... |
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- 574 - meetings of the ministers of finance of the European Union. Only the report is discussed. No mention
is made of the results of its discu ssion by the ministers.160
Section 4.4, Crisis prevention and -management.
According to the introductory sentences of section 4.4, the developments in ... |
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- 575 - This annual report is more than enough to prove that the most important declarations of Wellink are
untrue. The report is not full of forebodings and warn ings, but of reassurances.
The section Developments in supervision of the General overview includes the following
paragraph:
«For t... |
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- 576 - «The integrity and ex pertise of executive officers and policymakers are an important part of the
license requirements, beside criteria for the enterprise plan, solvability and internal organization.
Therefore DNB assesses executive officers of new institutions, and new executi ve officers of... |
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- 577 - and understanding. On the contrary: the silence about the GAO and OFHEO reports, the lack of
analyses resembling those of the GAO and OFHEO, and the facts of the crises show that they don’t.
That one can only design and implement mea ningful stress tests if one understands the system is only ... |
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- 578 - observer on a distant planet, instead of a supervisor responsible for the safety and soundness of the
Dutch financial system.
«4.1.2. Regauging supervision strategy: more risk orientation and integrity.
On the basis of the actual developments in the financial world and the merger with ... |
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- 579 - creating an effective fra mework of large exposure reporting at regulated financial intermediaries that
would extend — directly or indirectly — to hedge funds. Using the indirect method, regulators would
collect and aggregate large exposure data from traditionally regulated institu tions and,... |
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- 580 - Do I understand correctly that DNB considers crises inevitable, and thinks that its main duty is to
“manage” crises? (There is no mention or discussion of the DNB assumptions anywhere in the studied
documents).
Section 7.5, Policy of the authorities , is surprisingly uncritical (if not un... |
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- 581 -
DNB is not clear about its definition or interpretation of “financial stability”. In the brochure
Watchdog financial stability 195 of December 2008 the following quote comes nearest to a definition:
«A stable system can absorb external shocks without disrupting financial markets, financial... |
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- 582 - The downside risks for financial stability in the Netherlands remain limited in the base scenario
providing for gradually rising interest rates. This overview also sets out the possible consequences
of stress scenarios, such as a faster -than -expected interest rate increase, and a worldwide... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 582 | DNB APPENDIX
- 583 - supervisors, DNB continues to exert itself to keep the institutional framework for supervision, crisis
management and payment systems and securities trade adapt ed to the progressing financial integration
in Europe and elsewhere; in dialogue with the private sector. In these policy areas the ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 583 | DNB APPENDIX
- 584 - The clearest and most decisive proof of lack of knowledge of the financial system and lack of
understanding of the coherence of phenome na in that system is the following paragraph:
«As a new scenario a world -wide correction of housing markets has been added. This scenario
corresponds wi... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 584 | DNB APPENDIX
- 585 - AR 2003.
P. 93/87:
«The improvement of the risk management of the individual institutions goes together with
increasing use of instruments like securitization and credit derivatives. With these instruments banks
can transform risks, and exchange them amongst themselves , or transfer the... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 585 | DNB APPENDIX
- 586 - «New instruments like credit derivatives increase the intertwining of credit and market risks, and
create new forms of liquidity risk. For the Netherlands, with large and complex financial
conglomerates, a large pension sector, and a private sector with many assets but also much debt, it is
... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 586 | DNB APPENDIX
- 587 - Note that DNB doesn’t summarize or discuss the recommendations CRMPG addresses to the
supervisors.
Note that DNB AR 2005 implies that since 2003 nothing has been done about the “new” risks and
for example transparency. Although DNB itself notes that the volume of derivatives has taken a hi... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 587 | DNB APPENDIX
- 588 - in world -wide credit trade was 20% to 60%.218 In this way risks move outside regulated [= supervised]
sectors, so that the emissions of supervised institutions provide [relatively?] less information about the
total pos itions put out in the financial system. To an increasing extent, risks ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 588 | DNB APPENDIX
- 589 - write -offs going to be? What is the influence on the solvability position of the banks? To what extent
will the bond insurers be hit by these developments? What will be the consequences of this becoming
known? What is going to happen w ith the hedge fund sector? What is the influence of thes... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 589 | DNB APPENDIX
- 590 - valuation [“mark to market”]. In this situation it turned out that for many complex products there was
no market (any more), and the products had to be value d according to prescribed models. The models
have imperfections and uncertainties, with large consequences for the size of write -offs.... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 590 | DNB APPENDIX
- 591 - amplified when related markets are affected, such as that for ‘Credit Default Swaps’ (CDS) for
transferring credit risks between parties.
Much uncertainty has also arisen about the size and distributi on of the losses in individual financial
institutions. Since a number of market parties in... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 591 | DNB APPENDIX
- 592 - Hedge funds and private equity -funds are not supervised. But ever more supervised financial
institutions actively work with these alternative investments. In the current super vision and in the
periodical investigations DNB therefore pays attention to the risk management concerning these fun... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 592 | DNB APPENDIX
- 593 - supervis ion of the risk management of complex and intransparant investments, such as hedge funds
and private equity (see chapter 4, section 4.3.8).»238
What reason has DNB to believe that stimulation is sufficient? And why doesn’t this annual report
explain the ad missibility or adequacy... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 593 | ECB APPENDIX
- 594 - 7. Evaluation of some ECB reports 2006 -2010.
List of evaluated reports.
This appendix evaluates the following ECB reports:
Banking sector stability (BSS) report November 2006 (dated 20061106).
Financial stability report (FSR) December 2006 (dated 20061211).
Annual report 2... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 594 | ECB APPENDIX
- 595 - 7. Like all reports of all superv isors and related organisations, and although they write about the
same subjects, the reports of the ECB show little cooperation or division of labour with other
supervisors and related organisations.243 On the contrary: ECB evaluates the stability of the
ba... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 595 | ECB APPENDIX
- 596 - «Central banks have a strong and natural interest in the safeguarding of financial stability. This is
in particular be cause financial institutions, notably banks, are issuers of by far the largest component
of the money stock. It is equally because a stable financial system is needed for an ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 596 | ECB APPENDIX
- 597 - «OVERALL ASSESSMENT
The accounting and prudential information av ailable, complemented by information derived from
financial market indicators suggests that the near -term outlook for EU banks is one of continuing solid
performance. This overall positive assessment should, however, be seen ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 597 | ECB APPENDIX
- 598 -
Financial stability report (FSR) December 2006 (dated 20061211).
«PREFACE
Financial stability can be defin ed as a condition in which the financial system – comprising of
financial intermediaries, markets and market infrastructures – is capable of withstanding shocks and
the unravelli... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 598 | ECB APPENDIX
- 599 -
Some rema rks about the “overall assessment”:
1. Like all supervisors and related organizations (IMF, OECD and the like), the ECB has made its
own analysis. Without due regard for the work of predecessors and similar organizations. It is just
as deficient as the others . It is not even us... |
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- 600 - The first and largest part of the Foreword is devoted to economic developments, GDP and
employment, etcetera. No sub stantial attention is given to risks, even to risks that may cause recession
and loss of employment for many years.
The Foreword continues with matters related to internal ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 600 | ECB APPENDIX
- 601 - for financial economic decision making. This FSR December 2008 is the first FSR after September
2008. The FSR does not acknowledge the failure or deficiency of its earlier analyses. It does not
explain its errors, and does not show why future FSR s will be fundamentally better. It is written ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 601 | ECB APPENDIX
- 602 - averaging only slightly above 2% in the euro area, we have witnessed a decade of relatively stable
prices, in line with the ECB’s mandate to deliver pri ce stability. Likewise, longer -term inflation
expectations have remained broadly anchored at levels in line with price stability during thi... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 602 | ECB APPENDIX
- 603 - independently, and could only remain in business (somehow!) with government help or take over.
The following is t he closing paragraph of chapter 5, OVERALL ASSESSMENT:
«In summary, while the unprecedented policy measures taken by central banks and governments
were successful in stabilis... |
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- 604 - measures often avoided immediate financial outlays and direct fiscal costs, they created contingent
liabilities for the public sector. Investors quickly priced the value of this downside protection into
sovereign funding costs, which raised government debt servicing costs. In ma ny cases, gov... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 604 | FED APPENDIX
- 605 - 8. The Fed & its annual and GPRA reports 2006 -2011.
This appendix not only considers reports from the prehistory of the crisis, but also reports from a few
of the years following the crash. It evaluates the Fed and US government reaction to the crash and
crisis.
Table of contents of... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 605 | FED APPENDIX
- 606 - necessity of compromises and the way in which choices were made should be discussed in the
annual reports. This was not done however;
3. There is an abundance of evidence showing misconduct of the Fed management. The Fed
neglected its primary duties. This could have been seen from the annu... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 606 | FED APPENDIX
- 607 - within the framework of the overall objectives of economic and financial policy established by
the government ; therefore, the description of the Sys tem as “independent within the government” is
more accurate.»271
It is strange that neither the Fed nor the FCIC discuss this boundary cond... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 607 | FED APPENDIX
- 608 - supported by a staff of about 1,850.274 In addition to conducting research, analysis, and policy making
related to domestic and international financial and economic matters, the Board plays a major role in
the supervision and regulation of the U.S. banking system and administers most of the... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 608 | FED APPENDIX
- 609 - financial supervisors everywhere. There is no explanation or discussion. In particular there is no
explanation or discussion of differences with similar descriptions in the annual reports of other
supervisors, and those of IMF, OECD and still others.
The annual report 2006 includes a sect... |
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- 610 - is not covered by the GPRA, the Board of Governors voluntarily complies with the spirit of the act.»
The subdivision and formulations of this chapter differ from those of the overview. Reasons for the
differences are not given.
On p. 136 systemic risk is mentioned as part of one of th ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 610 | FED APPENDIX
- 611 - into a crisis”.288 As an explanation, it could have added: “In the past decade, the Fed has given
insufficient attention to signals about systemic risks. It failed to act in a timely manner. Until the end
of September 2008, the Fed tried to solve problems as they arose, without however recog... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 611 | FED APPENDIX
- 612 - for the mortga ge borrower/ consumer.294 On pp. 94 -5/98-9 of the annual report about 2006 it discusses
the “Nontraditio nal Mortgages - Balancing Innovation, Regulation, and Education”.295 It saw the
“balancing” as a problem. Although it euphemistically called it a “challenge ”, and covered... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 612 | FED APPENDIX
- 613 - quite remarkable if the Fed believed in the efficacy of only (passive) information.297 Especially given
the efforts by mortgage originators to sell mortgages to people with lower incomes. Efforts they must
necessary make to realize the HUD -goals.
The efficacy of the Fed information is not... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 613 | FED APPENDIX
- 614 - The annual reports of Bernanke’s first 4 years (minus one month) have the “traditional” format of
the annual reports of his predecessor. The overview of the annual report 2008 st ill mentions the
responsibilities a -d listed above. Starting with the annual report 2009 the list of duties in t... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 614 | FED APPENDIX
- 615 - better anticipate and mitigate broader threats to financial stability.»
If we knew nothing of 1994 -2008 this might seem comforting. Knowing the history and causes of
the crisis, and knowing that the Fe d knows it even better, this seems extremely inadequate. No self
criticism, and no a... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 615 | FED APPENDIX
- 616 - Consumer Protection Act has been signed into law.306 The name of the law is abbreviated Dodd -Frank
Act. Regarding its contents the annual report says the following:
«The act includes many of the reforms championed by the Federal Reserve to help strengthen the
financial system and reduce... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 616 | FED APPENDIX
- 617 - framework that were revealed by the financial crisis.»309
This is clearly untrue.
The sentence is part of the section Regulatory Developments: Dodd -Frank Act Implementation of
the chapter Other Federal Reserve Operations . The table of contents of the annual report 2011 shows
that the F... |
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- 618 - 9. The GAO 1994, 1996 and 1999 reports on financial derivatives and systemic
risk.
Table of contents of this appendix.
About the GAO.
The GAO report of May 1994.
The progress report of November 1996.
The FCIC -report about the 1994 GAO -report.
1999: Report to Congressio... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 618 | GAO APPENDI X
- 619 - The GAO report of May 1994.
This report was written as a consequence of “a wave of significant losses and scandals ” concerning
derivatives.311 The background is described in various places in the GAO report, while specific
examples of losses and scandals are given by the FCIC ... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 619 | GAO APPENDI X
- 620 - Chapter 4 Bank Regulators Are Improving Their Derivatives Oversight, but Weaknesses Remain ................................ ... 69
Various Organizations Are Responsible for Overseeing Banks and the U.S. Financial System ................................ ......... 69
Regulators Are Not Coll... |
https://digitalcorpora.s3.amazonaws.com/corpora/files/CC-MAIN-2021-31-PDF-UNTRUNCATED/zipfiles/0000-0999/0000.zip | 0000563.pdf | 620 | GAO APPENDI X
- 621 - «GAO found that no comprehensive indus try or federal regulatory requirements existed to ensure
that U.S. OTC derivatives dealers followed good risk -management practices. […] Regulators have
recently issued guidelines for certain bank dealers, and both regulators and market participants said... |
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